How Evil Are You?

I didn’t do too well on the evil meter. (Hat tip to Grrl Scientist, who is pure evil.)

How evil are you?

Health Savings Accounts and Adverse Selection

This is a few days old but I happened to stumble upon it from a link from a conservative site which launched a rather specious criticism of Ezra Klein’s criticism of Health Savings Accounts.

Ezra notes something everybody involved in health care knows, but it is always good to have the documentation. A small number of patients account for the bulk of the spending. Ezra demonstrates this with this graph from Kaiser:

HSA’s work by having individuals save money in tax free accounts for routine medical care, and they are sold along with a catastrophic insurance plan. Money in one’s HSA is used until the high deductible catastrophic plans kick in. Ezra’s argument is relevant as the incentives for spending money are lost once the sickest individuals exceed the high deductibles of HSA’s and their catastrophic coverage kicks in.

While significant, this isn’t the most important argument against HSA’s. The most important argument against HSA’s is almost lost in a single line in Ezra’s post. “They do nothing but disincentivize basic care, which doesn’t cost much anyway.”

Several landmark studies, such as the Diabetes Complications and Control Trials and the UK Prospective Diabets Study, have clearly established the fact that more aggressive care of diabetes early will reduce long term complications. Unfortunately many patients (and some doctors) don’t take problems such as diabetes and hypertension seriously since they have no symptoms in the early years and feel fine. Even when people have health care coverage, it is difficult to get many diabetics and others with chronic diseases to receive adequate care. The more people have to pay out of their own pocked, the less likely they will spend money when they feel fine. While this should not be controversial, I have reprinted some of my old posts from Light Up the Darkness and The Democratic Daily which link to further evidence of these assertions under the fold.

By making people pay out of pocket for basic preventive care and for treatment of chronic diseases, you are increasing the chances that people won’t pay attention to their cholesterol until after they’ve had their first heart attack. People with diabetes, hypertension, and hyperlipidemia, all assymptomatic for years, will be more likely to ignore these problems despite all the evidence that early and aggressive treatment reduces long term complications.

This leads back to the small number of people who do account for the vast majority of health care spending. HSA’s not only don’t reduce spending there, as Ezra points out, but will actually increase the number of such high risk patients. We’ll have more diabetics who allow their sugar or blood pressure to be out of control for years, increasing their risk of catastrophic outcomes. Less people will take modern medications which can lower cholesterol to a point which not only prevents but can actually reverse blockage in coronary arteries.

It is far more economical to treat diabetics and others with chronic diseases early than it is to pay for bypass surgery, dialysis, amputation of limbs, and post-stroke care when the long term complications of uncontrolled diabetes or hypertension catch up with them. HSA’s provide perverse incentives to treat populations in a far less cost effective manner. While the health care system needs repair, any fixes should concentrate on increasing the likelihood that chronic diseases are treated early when it is most economical as opposed to creating incentives to postpone care.

More information on Health Savings Accounts under the fold.